Restaurant Brands International: Innovative Menu Options And Strong New Store Development Drives Q2 Growth

by Trefis Team
Restaurant Brands International Inc.
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Riding high on sales growth, Restaurant Brands International Inc (NYSE:QSR), the parent company of Burger King and Tim Hortons, reported EPS of $0.30 in its second quarter fiscal 2015 earnings results, beating the market expectations by $0.06. The company reported net revenues of $1.04 billion, with strong comparable store sales growth of 5.5% and 6.7% for Tim Hortons and Burger King, respectively. [1] Compared to the 2014 pro forma second quarter result prepared by the company, its adjusted EBITDA grew 19% to $427 million, due to strong performances by both the brands in their respective major markets.

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We have a $42 price estimate for Restaurant Brands International, which is roughly the same as the current market price.

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Tim Hortons: Breakfast Menu Drives Comp. Sales

Tim Hortons’ comparable sales grew 5.4% in Canada and 7% in the U.S., driven by innovative menu items in both the food and beverage segments, especially Dark Roast coffee and the Crispy Chicken Sandwich. The performance of the brand was further driven by strong demand for cold beverages and by the breakfast segment. Compared to pro forma second quarter 2014 figures, Tim Hortons’ adjusted EBIDTA grew roughly 23% on an organic basis. Tim Hortons has always been consistent in introducing new innovative menu options to cater to the needs of customers in every season. The company opened 52 net new Tim Hortons restaurants in the second quarter, compared to 22 in Q2 2014. This takes the total count to 4,776 Tim Hortons restaurants. The company still remains the category leader in Canada and is confident to increase their presence there.  In the U.S., Tim Hortons owns close to 900 restaurants in nearly 18 states, but still has a lot of growth potential in the country. The company has increased its pace of new store developments over the last 5 years. Menu innovations and strong growth in new store development have contributed significantly to Tim Hortons’ revenue growth.

Moreover, with just 65 Tim Hortons store locations in the Middle East, the company is missing out on several major markets around the globe, and hence, the company plans to accelerate the expansion in high growth markets in the coming years.

Burger King: New Markets In Focus

Burger King posted a strong 7.9% increase in comparable store sales in the U.S. and Canada, and 5.1% growth in EMEA (Europe, Middle-East and Africa) region, both much higher than that in Q2 2014. Impressive comparable sales growth in all the geographical segments, coupled with net restaurant growth of 141 new stores helped Burger King in achieving an 11.6% year-over-year increase in system-wide sales. Burger King’s strategy of introducing fewer menu items with less operational complexity and more profitability is helping the company to post higher margins. New menu items in its breakfast category, such as Extra Long Pulled Pork sandwich and premium menu items, such as A1 Hearty Mozzarella Bacon Cheeseburger, have been receiving positive response from the customers, resulting in more customer footfall in the breakfast daypart.

On the other hand, Burger King continues to expand its presence in new markets, such as India and South Africa. The company thinks of India as the next big market for the brand, and has currently 20 restaurants in the country. New Burger King stores were established in Italy and Poland in the second quarter, as the company plans on expanding its existing presence in Southern and Eastern Europe. Furthermore, Burger King announced that it will open 350-400 restaurants in France in the coming few years.


The merger of Tim Hortons with Burger King has strengthened the company’s market share in the breakfast market, and has also boosted the top-line performance, with a lot of growth opportunities lined up in fiscal 2015.

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  1. Restaurant Brands International, Q2 2015 earnings call transcript []
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